VEL
Velocity Financial, Inc.
$17.27
Banks, Insurers & Asset Managers
90%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 60.2% below fair value
You pay
$17.27
Bear
$28.98
Fair
$43.42
Bull
$52.09
Bear
$28.98
+67.8%
ROTCE 12.1% → 1.96x TBV
Fair
$43.42
+151.4%
ROTCE 16.1% → 2.93x TBV
Bull
$52.09
+201.6%
ROTCE 18.5% → 3.52x TBV
Key Value Driver
ROTCE (16.1%) vs. cost of equity (8.1%)
Implied Market Multiple
1.04x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $22.00 from 7 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $43.42 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Wall Street's average price target is $22.00 (from 7 analysts). Our estimate is 122% above the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly